Did You Take Your Payroll Partner to the Vet?

By Michele Honomichl

Many people have pets that they probably like better than their co-workers and maybe even some family members. Pets make you feel happy, foster trust (at least the ones that don’t bite), and perpetuate a mutually beneficial partnership. But any good pet owner knows that when adopting the adorable puppy, or meowing kitten, the first stop is to the vet to ensure you understand your new companion’s current health situation and potential future needs.

There is no difference when selecting a payroll partner. There are critical health and service indicators that you should feel comfortable with prior to embarking on a long term relationship. These should include a review of the following areas; scope service offering, legal and compliance review, financial strength, IT infrastructure, and business continuity planning.

The Scope of Service Offering: During any good sales process, your company’s needs should have been analyzed and aligned them with the scope of services offered by your selected partner. It is good to ask about the depth of each service offering and for references of clients using those services. Often companies that provide payroll processing also offer accounting, entity set-up, employment services, etc. Therefore, it is good to ask what percentage of the partner’s business is payroll processing? How many people on the team are payroll professionals? How many international clients do they have? How many of people on staff speak English? The goal is to ensure the provider has enough bench strength to support your needs if there is a turnover of their employees.

Legal and Compliance: As part of your due diligence, you should review the partner to determine if there are any legal issues with other clients, internal shareholders, or other entities. Are they current with their government filings? Do they have an internal risk/compliance team? Are they following proper protocols for not only local regulation, but international compliance such as data privacy, anti-bribery, and data security? Can they prove they have ISO or SOC certification? It is best to ask open ended questions regarding compliance and utilize local country government agencies to determine if the partner is in good standing.

Financial Strength: When evaluating partners, it is best to review several years of financials to determine stability. The goal is to ensure you have a partner that will be around at payroll processing time. This can be tricky as many partners are privately held, but most will provide you the basics of their balance sheets and access to capital. Additionally, it is important for you to understand their levels of insurance and what type of liability they are willing to accept, allowing you to assess the level of risk you are willing to take in that particular location. Local country norms will dictate some the levels of insurance, liability, and access to capital, so it will not be consistent globally. Often these items may be negotiable. So it never hurts to ask if a partner can increase their insurance or liability coverage, or seek additional capital support if your business is large enough to warrant the request.

IT Infrastructure: Each country is going to have differing levels of IT infrastructure available. In many countries, this may mean that the payroll technology is run locally on a server in the office with limited redundancy and in just as many other countries, payroll partners will have Tier 3 data centers, full redundancy, and sophisticated monitoring systems. Typically, companies will have a lengthy IT checklist that a payroll provider will need to complete. Even if a payroll partner is small and in a remote location, with minimal employees being processed, it is important to have this checklist completed. Then you will have a good risk profile to improve over time. It is completely acceptable to ask your partner to improve their infrastructure, slowly, to bring them up to global standards.

Business Continuity Planning (BCP): Ask your partner a series of what-if questions. What if the power goes out? What if there is a local crisis? What if the banks are closed? What if your technology glitches? What is your turnover increased dramatically? Assessing your partner’s answers to these questions will help you determine your local risk and help you build your own BCP in the case of the same crisis situations.

Payroll partnerships should be viewed as long-term relationships, just like selecting a pet that lives for 20 years. Also, like a pet, payroll partners should receive a checkup on an annual basis. Ask your partner to review the documentation they sent you at the beginning of the relationship to highlight if anything has changed. This process will help alert you to any looming issues and potentially give you time to make decisions regarding any change in risk. Partnership maintenance, like pet ownership, should always be performed in the spirit of keeping the relationship healthy and mutually beneficial. The ultimate goal is to create a healthy partnership the lives as long as any well cared for cat, dog, or horse.